Struggling air freight operators fighting to survive in a global recession that has hammered their traffic volumes are being hit with a new bill from Boeing. This has introduced an annual fee for technical support to owners of its aircraft that have been converted to freighters by shops other than Boeing.
That technical support has historically been free, but for conversions delivered on or after 15 April the annual support cost of running a Boeing aircraft is now $150,000, or $250,000 for a widebody. For operators of aircraft converted by non-Boeing licensed converters, the fee is per aircraft.
Operators of aircraft converted by Boeing-licensed supplemental type certificate holders fall under a special regime that sets fees at $200,000 per major type per year, or $50,000 an aircraft for fleets of three or fewer aircraft.
As before, operators of aircraft converted by Boeing's own Boeing Commercial Freighter (BCF) programme receive free support.
In a letter to customers obtained by Flightglobal's finance news service Commercial Aviation Online, a Boeing official explains that the fee for third-party conversions has been set "to be able to continue providing the level and quality of support our customers expect". The letter is from Carl Brandenburg, Boeing Commercial Aviation Services customer support regional vice-president for the Middle East, Africa and South Asia.
TECHNICAL SUPPORT
As in the past, technical support will be provided only to portions of an aircraft not affected by the STC conversion. The fees do not include the cost of processing each service request, which will be charged according to existing policies. A minimum one-year term is required for each aircraft and the agreement will automatically renew at Boeing's then current access fees.
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Boeing says the business environment is changing, with demand for Boeing support increasing at a rate much faster than the rate at which the overall fleet is growing. "We identified this issue last year and have been working internally to develop the details of the programme," it says.
"To ensure we have the resources to continue to provide the level of support our customers expect, we need to change our business model."
The manufacturer has identified about 1,800 aircraft to be converted in the next 20 years. It says: "Charging a fee for some of the technical support we provide for converted aircraft going forward will help us maintain the quality and level of support our customers expect."
One analyst believes Boeing's motive behind this access fee is to recover the cost of providing technical support to customers that are not directly linked with its own business.
However, as one cargo conversions expert points out: "The OEM has always maintained the ability to refuse repair services for non-OEM or 'altered' products and has historically issued all repair documentation with stipulations that such repairs consider that the aircraft is in its original delivered configuration."
And, he notes, many aircraft are sold several times to new operators that typically demand a great deal of support every time an asset changes hands. "If it is not a directed attack on competition, then why do all of the 'follow-on' passenger aircraft owners and operators share in the cost escalation of OEM product support?" he asks.
Niky Terzakis, managing director of TNT Global Air Network, a Belgium-based freight operator whose 31-aircraft fleet includes 10 737-300 conversions, says: "My viewpoint is that Boeing has been commercially unsuccessful in selling BCF conversions due to their unjustified pricing, which explains why most airlines or asset owners have preferred to buy from third-party providers.
"It sounds as if Boeing is now trying to penalise or tax the operators and owners for not accepting its pricing in first place."
He adds: "Boeing also keeps talking about the difference in quality between BCF or Boeing managed programmes against third parties. I'm afraid, here again they are underestimating the fact that all third-party conversions such as Israel Aerospace Industries or Pemco are proving reliable in service results.
"Let us not lose sight of the fact that these aircraft were converted for half the price of a BCF equivalent offer."
AIR-FREIGHT REVOLT
Terzakis is blunt in his view that Boeing faces a revolt by the air freight industry, and the winner may be arch-rival Airbus: "We will continue to team with operators and lessors and fight this move while at the same time we continue and increase our efforts to support Airbus cargo conversion developments."
Owners of passenger airlines, too, have cause for alarm. Another industry source says major carriers will now have a more difficult time selling their ageing aircraft for cargo conversions.
Any impact on residual values could multiply if operators do push back against Boeing.
As another cargo converter comments, if the fees issue should end up in court, few if any conversions will be sold until there is a resolution.
Boeing's fees move, he says, "will degrade residuals and ultimately postpone or cancel conversion plans. Less conversion will increase desert inventory and further depress used aircraft values. Everyone who owns an asset should be screaming bloody murder as residual values will take a hit at all levels."
Source: Commercial Aviation Online
